[Edaily Reporter kyoungeun kim ] IBK Investment & Securities announced on the 3rd that it is maintaining its “Buy” rating on HYOSUNG HEAVY INDUSTRIES(298040), noting that while second-quarter operating profit fell short of market expectations, the company’s robust order intake remains intact. The firm set a target price of 4.1 million won, a 16.3% reduction from the previous target.

Kim Tae-hyun, an analyst at IBK Investment & Securities, stated, “We maintain our ‘Buy’ rating as we believe earnings momentum, driven by a steady flow of new orders and capacity expansions both domestically and internationally, remains valid,” adding "We have lowered the applied target price-to-earnings ratio from the previous 50.1x (a 20% premium over the four-year high) to 41.7x (the four-year high, with the premium removed) to reflect the valuation adjustment across the entire power equipment sector."

The firm continued, “The company has raised its annual order guidance by 43% to 12 trillion won (from the previous 8.4 trillion won), which represents a 58% increase year-over-year,” and “Core products such as ultra-high-voltage transformers, gas-insulated switchgear (GIS), and gas circuit breakers (GCB) have strong pricing power due to high technological barriers and a limited supply structure, so high profitability is expected to continue through selective order intake,” the firm added.

HYOSUNG HEAVY INDUSTRIES’ second-quarter consolidated revenue reached 1.687 trillion won, up 10.6% year-over-year, while operating profit rose 60.9% to 264.3 billion won. However, these figures fell short of both the consensus estimates (revenue of 1.8119 trillion won, operating profit of 290.7 billion won) and IBK Investment & Securities’ projections (revenue of 1.9091 trillion won, operating profit of 324.5 billion won).

Analyst Kim explained, “While the construction division posted solid results, the heavy industry division faced headwinds due to the deferral of revenue recognition for some Middle East projects (approximately 60 billion won) to the second half of the year caused by geopolitical issues, as well as the reflection of consolidation adjustments (elimination of unrealized gains) for products shipped to the U.S. subsidiary.”

By segment, the Heavy Industries segment’s revenue reached 1.1371 trillion won, up 7.2% year-over-year, while operating profit rose 36.4% to 229.8 billion won. Analyst Kim stated, “Although the results were somewhat disappointing due to factors such as deferred revenue recognition, the operating profit margin exceeded 20% thanks to favorable selling prices and an increased share of high-margin products.”

New orders totaled 3.3242 trillion won, a 20.4% decrease from the previous quarter due to a high base effect, but continued to show robust growth with a 51.3% increase year-over-year. The order backlog also expanded to 17.5070 trillion won—up 63.6% year-over-year and 15.9% quarter-over-quarter—enhancing visibility for medium- to long-term performance.

Revenue and operating profit in the construction division stood at 549.1 billion won (up 18.5% year-over-year) and 34.4 billion won (returning to profitability), respectively. Analyst Kim explained, “While continuing a selective order-winning strategy focused on large-scale sites and public projects, profitability improved significantly as the base effect of the approximately 24 billion won in bad debt provisions recognized in the second quarter of last year was eliminated.”